Saudi Arabia Slashing Tax for Oil Companies

March 28, 2017 Taxation in Saudi Arabia

Oil producers taxRIYADH – Saudi Arabia is eye tax changes which are stacked to heavily benefit the IPO of the state oil producer.

The government of Saudi Arabia has now announced that it will retroactively reduce the income tax paid by oil companies operating in the country, although some experts believe that the move is intended to increase the interest in the IPO of the state oil producer Saudi Aramco.

Currently, oil producers in Saudi Arabia are charged a rate of income tax of 85 percent, which would now be reduced to a rate of 50 percent, applicable for all incomes from January 1st this year.

The rate of the tax will vary based on the amount of investment committed by each respective firm, with lower levels of investment seeing a higher rate, maxing out at the current level of 85 percent.

It is expected that Saudi Aramco will fall into the lowest tax bracket.

Investment experts believe that the tax change is intended to indicate to potential investors in Saudi Aramco that the company will have a higher level of available cash, which may be used to pay out dividends, a move which could amp interest in the IPO.

Some estimations place the value of the potential IPO at almost USD 2 trillion, potentially the biggest IPO in history.